The Profit loss, in term of the pharmaceutical industry, in foam production sector According to the figure in the case study, which is provided, we can see that the annual sales for foam production, in year 2006 and 2007, will get a negative result. Our prediction, with this issue, is that the company cannot sell out much of bulk foams to other industries. Also, considering the market share of the company, in the pharmaceutical sector, the share of 40% profit margin tends to make the loss in production function. Moreover, the company is focusing more on the international basis for this section, which, in
Thailand, the company only on lowering the cost of production only. Medical equipment that can be produced in Thailand is those that do not require any high technology. As result, the quality of the product produce in Thailand tends to put the company in the difficult stage to compete with domestic market. Market size of pharmaceutical industry As mention above, the size of the market in Thailand tends tend to be high. Since, there are so many players in this market (which are included B. K. Hospital Supply (Thailand) Co. ,Ltd, Bangkok Advance Technology Co. , Ltd. CM Biotech Co. , Ltd. , G. E.
Medical Systems (Thailand) Limited, J. Summit Co. ,Ltd and M. Control Co. , Ltd), the company may have less opportunity to sell their product. Objective: The objective of the alternative planes is to increase more sales and demand from production. Also, increase the brand awareness of the company as well. Alternatives: 1. 1 Looking for the new market to expand Since the market in the domestic countries tend to be very narrow (80% imported product) which the company may only get the profit around 20%, our first strategy is to expand in the foreign market instead of domestic 1. 1. 1 Countries Choices Asia Market vs…
U. S. Market Asia Market Asia becomes one of the most attractive markets for the pharmaceutical for some reasons such as the highly demand for their product, government concern and destination. Demand in Asia Country According to the data provided by AIMS, Asia appears to be an assured avenue of growth for pharmaceutical manufacturers. According to AIMS Market Prognosis 2012, the pharmaceutical market in Asia is expected to reach 350 billion USED in 201 6, comprising 30% of the global pharmaceutical market ($1. 2 trillion USED) and driving close to 50% of global, incremental growth through 2016.
According to the case study, Foamier Company has already expanded their business into several countries in Asia such as Malaysia, Thailand and China. However, there are some countries that the company can be considered to expand their businesses such as Japan because Japan is one of the revenue in the region (contributed around 800 billion USED from the less of Asia countries). Government Spending According to the information provided by Pacific Bridge Medical and COED Health Data, in Japan, the government has a highly concern on this issue, due to the higher rate of suicide and natural disaster.
Factors contributing to demand growth in Japan’s market include high levels of healthcare expenditure and a massive elderly population. Nearly one in three Japanese citizens is older than 60, and many of them suffer from chronic conditions requiring diagnostic imaging. Paying for these procedures is easier in Japan than it is in other Asian countries. Not only do Japanese have high average annual incomes (more than $35,500 in 2012), but they also have a government that provides some form of health insurance to all individuals. Cost rarely gets in the way of medical imaging procedures in Japan.
Also, in term of spending in Japan, Japan spends on the health care of their population accounted around 2700 USED app, which the trend tends to increase. Destination In term Of the destination, the destination from Thailand to Japan is accounted around 377873 square kilometers, compare to US which covered around 9. 8 million square kilometers. As a result, choosing the Asia market will be easier to manage. U. S. Market The company can expand the market to US as well. The reason is that, according to the graph above, U. S. Has a highest concern on the health of their population.
This can be implied that, in the hospitalize sector, it needs a lot of variety of equipment. As a result, the demand of this market will be high. Also, as mentioned from the case, the company already expands in U. S. Company. As a result, the company was be able to enter the market without many challenges. 1. 2 Expand into new market segment Instead of seeking the new market, which, basically, you do not know anything, the company can seek for a new opportunity in their new product lines. According to the case, the company was only invest in a certain kind of industries which are electronics, pharmaceuticals and automotive& auto arts.
However, there are many fields that the company may try to exercise such as sport product, consumer product, house ware and etc. The company can produce and try to sell to the new customer. Since, in some kinds of product, people can treat the product that made from foam can be substitute product. Some people may prefer foam product because it is cheap and easy to find. 1. 3 Expand inside the countries The company can look to expand their business inside of their countries as well. According to the case that is mentioned, there are only 3 plant manufacturers established in Thailand which are located in Gamut Prank
Province, Attitude Province and Conjure Province. According to this figure, we can see that the 3 locations that the firm operated are in the middle Of Thailand. The company can seek to open the new plant in North, Northeast, South and etc, In order to increase the demand and sale volume. Recommendation As the company is not able to operate the full production (currently 30%) because the demand is quite low, we recommend the company to expand the market into abroad countries such as Asia. This action can make the company gaining more customers and will be able to operate full production capacity.
This global expansion can be connected with the company’s vision which is to be the global leader in technical and specialty polyurethane foam products. The reason we recommend to expand abroad rather than domestic is the demand in Thailand is quite low and the market is very small. In Thailand the company can only produce at 30 percent of its overall production which means that the supply that the company can make is a lot more than the current demand in Thailand itself. So we would like to operate the full production by sourcing more customers outside Thailand to purchase our products.
The positive point is when the company can run full production, it means that it has to purchase more raw materials into productions. With the increasing number of purchasing raw materials, the company will receive higher bargaining power with the suppliers in order to purchase cheaper materials. To be specific, we recommend the company to penetrate into Asian markets first, because Asia is the nearest destinations. All Foamier factory plants are located in Thailand and there are many industrial countries in Asia such as China. We have chosen to export the products to foreign countries.
The season we chose exporting is the first step to become the global expansion is to export. Exporting can be profitable for the company because it can make the sales to grow faster than the non-exporting. This can be explained that the company would gain more revenue and more customers. This can make the company to be able to create the higher profit margin and lower cost of productions. Action plan We decided to expand our market to abroad because Thailand market does not have great potential to maximize the production’s capacity of the company.
Surely, by expanding to neighbor countries could be a great opportunity for the company to generate growth. We are not aiming at European countries and IIS market as an exporting destination because it involves high risk as we do not familiar with the market and our product is unique. However, we do have to conduct demand projection to find out which countries are in need or have high demand for our products. Also, we have to research in term of trade barriers between importing countries as we are new t international trade.
It also helps us to find the best destination for exporting the product Firstly, we cannot ignore the existing market. It could be the main source of capital to expand to wide market globally. We did realize that the market is limited and the demand for the products are not so high compare to our production capacity. Therefore, we attempt to cut cost for domestic production. At first, we can sell our assets such as machines and other tools for production that are not necessary for the existing demand. Once there are more orders, then we could start outsourcing the machines to minimize cost.
Cost is very important at this stage because we are entering foreign market. We are competing with the rest of Asian countries. At a stage which we are successful exporting or FED, we will purchase back our own machine and build more factory in different place to correspond to the high demand and need of the product. Secondly, we consider different entry modes for different coo entries as they are diverse in market system and regulation for international trade. It would be more efficiently to use different entry modes rather than focusing on exporting solely.
Definitely, we plan to do direct export. It is simple and do not involve to much risk to perform. We could be a suppliers for local market in different countries around Asian. When there are orders, we deliver, It is not so complicated and the cost is not too high to handle. However, cost of delivering the products and trade barriers are the main factor to consider exporting as the entry mode. We have to do research on these to issue to maximize our profit and gain competitive advantage against local competitors.
The choice for entry mode is wholly owned subsidiaries including two types of strategies, green field investment and acquisition. These two entry modes consider as a high risk entry as they requires high capital investment. However, we can fully operate abroad and set up a new ease factory for production or main hub for exporting. Acquisition seems to be unpractical and unnecessary but we think that it could be a choice for some countries that the industry is not so popular. We can get in and buy the company. The cost would not be so high as the industry is not so popular.
Also, we do not have to deal with building process and new factory to decrease complication in entering the market. The last entry mode’s choice is turnkey projects. Again, it seems to be redundant and unpractical. However, we think that for remote country, it is too risky and complication to do equines and trading. Turnkey projects could be an appropriate choice to expand market in remote country. We consider it as a last choice for entering new market. Foreign direct investment’s opportunity for some countries are limited and involve high risk and complication.
Therefore, it could help us expand larger market by exporting our process and technology to other countries. In summary, we divide different entry mode by different stage as following Early stage Mid stage Late stage Export Yes Green field investment Turnkey Projects There are some other external factor to be taken into consideration such as remonstration cost, trade barriers, and capita investment budgeting. Mainly, we plan to do exporting in early stage. Once the business is stabilized and get stronger, we will attempt to do green field investment in different countries around Asian in the mid stage.
Sometimes, there are limitation in term of expansion by using export and green field mode, then we could use turnkey projects instead those to support our growth in remote area or across continents. To discuss our broad future plan and movement, we will maximize profit in the existing market first to make it become the main source to support in the cantonal trade. The production capacity must be ready to meet the new demand in other outside market of Thailand. Exporting to neighbor countries in our next step. It could be Manner, Vietnam, Cambodia, or Laos.
We are not so sure about the performance of the product in these country. However, we think that the foam industry still has some gap in the market to be full filled or in other word there are potential demand to be served. It is simple and the transportation cost can be handled. Their markets are somehow similar to Thailand compare to other countries in Asian. We will start slow by exporting to these countries. Once the sale and production is stabilized, we must have enough money to enter other market by using green field or acquisition mode.
We will start to enter and expand the market in faster scale. Our first goal is to be a well-known exporting company for these particular products in Southeast Asia. Once it is achieved, the final goal is to become one of the largest global multinational company proving these particular products. After dominating Asia, we will enter other continents and compete globally. Key participants There are several participants to conduct and perform our strategies. We have to deal with people internally and externally.
Also we have to handle international relationship with other countries we want to do business with. In term of exporting, we have to find company to transport out products and services to exporting destinations. Importantly, our customers abroad must be reliable and consistency. Finding new customers abroad is another challenge for the company. Marketing section has to have a plan to capture new variety group of customers in different countries. In term of direct investment, we have to have suppliers to provide us raw materials and tools or production abroad.
We also have to have a solid distribution channel to deliver to products across the countries, because some countries such as Cambodia and Manner, transporting system and road infrastructure are not well developed. Thereby, it could be a threat to do foreign direct investment. We also have to deal with government sections in different countries in term of trade barriers and tariffs. Different countries have diversity of regulation about these thing. It could be a threat to enter the market regardless of any entry mode we are trying to perform.
As we have mentioned above, there are any key participants involved in the strategies. It is risky but it is a great challenge for the company to overcome to generate growth and pursue the company’s goal. Budget and financial need We have to do a lot of research and development in different aspects. Firstly, we have to invest a lot Of money to observe and examine different markets we want to go in. Also, we have to be well-prepared in every stage to avoid problems and international conflicts. We could use the retained earnings to support this market research.
Importantly, we surely have to do research and development about our products. Firstly, we want to produce in low cost but the quality of the product must be standardized. Secondly, we want to improve the quality of our products to exceed international standard to be able to compete with international competitors around the world. We think that we cannot use our reserve capital for this section because it requires high capital investment and it takes a long time do perform. Therefore, we decided to loan money from Thai bank to support this research and development project.
In early stage of exporting, we will not loan money but in the mid stage that we decided to move on o do green filed, there could be n extra loan to support this movement because it requires large amount of investment. If we do not find new source of money from financial institution, we could probably end up running out of cash flow. Marketing plan Currently, we do not have a solid marketing plan as we have to conduct a market research first. Roughly, we plan to compete in price by lowering cost of production and increasing quality of the product. Pricing is the main focus for us to do marketing and compete with competitors.
Finding and attracting customers in foreign country is the number one great challenge for marketing Lana. As the company is not huge enough and become successfully operating in Thailand, it is hard for marketing plan to do to advertise and attract new customers. Marketing seems to be a big problems for us because the products we are providing are unique. It is mainly business-to-business model. It is difficult to advertise products as there are not much channel to do so. Anyway, the main position for our company in his section is to become suppliers for large companies in different countries global.
Basically, marketing team has to find potential company in different market for the many to provide products and services. Contingency plan It is normal for business for a project to end up with failure and we do realize and aware of it. The strategy requires high performance of management and leadership. Poor management could lead to conflicts and problems that could make the company approach bankruptcy. Therefore, we come up with alternative and a contingency plan. We realize the strength of the company that we have a large capacity in production. We think that we could generate growth in the existing market by creating new product lines.
The industry we are in are big enough and versatile to produce various type of products to the markets. It is a great potential for us to generate growth and maximize the capacity in production Of our factory.